Next pay period I will receive a small raise at work, to the tune of $2,500 (a 3% raise). While I’m stoked to be getting any raise at all, let’s be real, it’s not a life changing amount. In fact, I’m only expecting to net $75 more each paycheck because of it. Big Macs on me tonight guys. Wait… too expensive, dollar menu cheeseburgers on me instead 🙂
Girl Ninja and I have decided to do the boring and responsible thing and increase our retirement contributions, as opposed to increasing our discretionary cash flow. We’ve been contributing 10% to my 401k, but looks like it’s time to increase it by another 3%? My employer matches 5%, so in total 18% of my gross pay will be going to my 401K plan.
Is that hot or what?
So yeah, technically I got a $2,500 raise, but before I even have a chance to see it in my paycheck, it will be going straight to 65-year-old me via retirement contributions. If that’s not keeping up with the Joneses I don’t know what is.
Since I’m a self-proclaimed PF nerd, I thought I’d run a quick calculation…
If we keep throwing that $2,500 in to our 401K plan for the next 40 years, do you want to know how much extra we’d have come retirement? This example assumes an 8% rate of return.
You can see the decision was easy. Get $75 extra in each paycheck or have an extra $732,000 waiting for me when I’m older? I don’t know about you, but I’m picking the latter every time.
Lifestyle inflation is cool and all, but if we are already content with what we have, what else is there to inflate besides our savings, retirement, and charitable contributions? I’m not going to go run out and buy another TV or laptop just for the hell of it (pardon my language).
Last time you came in to a little extra money, what did you do with it? If you had to inflate your lifestyle in one aspect how would you do it? (We would probably dine out a little more, or maybe pay for a maid service).